Scotland's digital strategy: evidence discussion paper

Executive Summary

Since 2007 the Scottish Government's central Purpose has been to create a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth. A digitally connected and skilled nation is a key component to achieving the mutually supportive goals set out in Scotland's Economic Strategy of boosting competitiveness and tackling inequality.

Digital is a key driver of economic productivity and innovation, job creation and internationalisation and supports inclusive growth that is broad-based across individuals and cities, regions and rural areas. Ensuring that everyone can benefit from the digital world, through supporting a digitally skilled and resilient nation, tackling barriers to digital inclusion and ensuring digital connectivity across the whole of Scotland will be key to realising the benefits of the digital world.

This paper provides an evidence base to accompany the publication of Realising Scotland's full potential in a Digital World. It summarises the important links between digital and economic productivity and inclusion and the ways in which digital is changing the way we live, work and do business in Scotland. Finally, it analyses Scotland's performance on various digital dimensions over time and in an international context.

Why Does Digital Matter?

Digital technology is at the heart of daily life and continues to have an unprecedented impact on the wider economy through innovating household activities, education, employment, and public services.

Digital connectivity is an essential component of national infrastructure and its contribution to productivity growth is widely recognised.

• A study for the Organisation for Economic Co-operation and Development ( OECD) of 25 OECD countries between 1996 and 2007 estimated that a 10% increase in broadband penetration increased Gross Domestic Product ( GDP) per capita growth by between 0.9 to 1.5 percentage points. ^[1]
• In addition, a report commissioned by Scottish Futures Trust found that becoming a world leader in digitalisation could increase GDP in Scotland by £13 billion by 2030. ^[2]

Reliable digital infrastructure can reduce costs and enhance revenues for businesses, promote flexible and remote working, and has important inclusion impacts, presenting opportunities for those located in remote locations.

Digital skills gaps and shortages have been identified globally and in Scotland. Ensuring the population is digitally literate and business needs for digital skills are met is key to driving economic competitiveness and capturing emerging opportunities.

Ensuring that all citizens are included and confident in the digital society that Scotland will become is critical to the future of a fairer Scotland. Digital connectivity and literacy have numerous benefits to individuals, including improving access to public services, education and skills development, reducing isolation, supporting health and wellbeing and increasing employment opportunities and flexibility. However, evidence suggests that within Scotland certain groups are less confident performing online activities. Closing the digital divide in Scotland will positively impact social cohesion, and improve both social and economic inclusion.

Digital technology also offers a wide range of opportunities for innovating public service delivery, including healthcare and education. Delivering online public services helps control costs, reduce paper handling and transportation costs and enables users to be involved in service design and delivery. Delivering public services online may also enhance accessibility of services to rural and isolated communities, those with mobility difficulties and citizens that face other barriers to accessing conventional services.

While rapid digital developments have provided a huge amount of opportunity and potential sources of efficiency for individuals and organisations, these new technologies have also brought unprecedented threat. It is critical that individuals and organisations become resilient online, aware of the risks of using digital technologies and capable of responding to them.

What Are the Recent Digital Developments Impacting on Scotland?

Over 3.6 billion people (50% of the world's population) are estimated to be internet users in 2016, an increase of over 900% since 2000. ^[3] Individuals are using global digital platforms to learn, find work and build networks.

Developments in digital technologies and data use continue to change the way we live our lives, from innovating workplace practices to disrupting traditional markets. Some of the key developments that are impacting how we live, work and do business in Scotland include:

• Flexible working and workplace innovation enabled by the increase in remote working practices;
• The adoption of cloud computing, which enables remote working and increased collaboration, while often improving cost and environmental efficiencies and providing security benefits;
• The sharing economy - online platforms which allow people to share access to underutilised assets, resources and skills - which continues to innovate traditional markets and the way in which consumers access products and services;
• The European Digital Single Market, a political priority of the European Commission, that aims to create an environment where individuals and businesses in the EU can easily carry out online activities under fair competition and a high level of data protection, irrespective of their place of residence;
• Smart Cities which integrate Information and Communication Technologies ( ICT) to innovate across sectors, including transport, health and energy, in order to manage resources efficiently, make cities greener and improve the population's well-being; and
• The increasing cyber threat and importance of cyber resilience, which will be heightened as more devices - the 'internet of things' - become connected to the internet.

How Has Scotland Performed Digitally?

Connectivity

• There has been a steady increase in the percentage of premises where next generation broadband access is available in Scotland, from 41% in 2011 to 88% in 2016, and Scotland performs well relative to international comparators. ^[4]
• Although the gap in coverage between rural areas and the rest of Scotland has decreased over time, it remains 37 percentage points in 2016. ^[5]
• Average broadband speeds have increased in both urban and rural areas over time, but the gap between the areas has widened and stands at 24 Mbits/s in 2016. ^[6]
• 4G coverage has steadily increased in Scotland, with 92% of premises having outdoor 4G mobile coverage from at least one national mobile network operator and 58% having outdoor coverage from all four 4G networks. ^[7]

Skills

• There has been an increase in the number of students undertaking computing and digital technology-related qualifications, however a significant gender gap remains at all levels of qualification. ^[8]
• 26% of businesses in Scotland currently undertake activities to develop employees' digital skills, with a further 18% planning to do so in the future. ^[9]
• There is a demographic divide in digital skills, with those in social housing, those with incomes between £10,000 and £20,000, and those over 60 consistently being less confident in performing a variety of online activities. ^[10]

A Digital Society

• The percentage of adults using the internet for personal use has increased over time, from 63% in 2007 to 82% in 2015, though use is strongly linked to age and income. Less than a third of people aged 75 and older used the internet in 2015, compared to 97% of 16-24 year olds. The gap in internet usage between the lowest and highest income brackets has decreased from 58% in 2007 to 21% in 2015. ^[11]
• There are variations in internet take-up by local authority, with 89% of premises in Edinburgh and East Dunbartonshire having home internet access, compared to 73% within Glasgow. ^[12]

The Digital Economy

• According to Scotland's Digital Economy Maturity Index, which segments businesses in Scotland according to their level of digitalisation, the vast majority of businesses are classed within the second lowest or middle maturity segments, basic browsers (38%) and tentative techies (30%), and only 3% of Scottish businesses are classed within the top segment, digital champions. ^[13]
• 87% of Scottish businesses have a website, but use of other digital tools, such as enterprise resource planning and customer relationship management, lags behind other advanced economies. ^[14]

Public Service Reform

• Increasing collaborative Information and Communication Technology ( ICT) procurement has resulted in substantial monetary savings across Scottish Government public bodies, an estimated £54.4 million in 2015/16. ^[15]
• In 2015, 86% of users were satisfied with the overall quality of online public services in Scotland. ^[16]

Cyber Resilience

• There is varying use of different online security measures, with two-thirds of adults in Scotland indicating that they avoid opening emails or attachments from unknown people, whilst just under a third said they make sure their mobile phone has up-to-date antivirus software. ^[17]
• Use of the various online security measures varies by age, with those aged 60 and above generally less likely to adopt online security measures than those in younger age groups. In addition, adults living in the 20% most deprived areas of Scotland were generally less likely than those in the rest of Scotland to adopt security measures. ^[18]
• Small businesses are less cyber resilient. One in five Scottish-based small businesses admitted that they failed to take any steps to protect their data. ^[19]